US Household Wealth Dips in Q2

A new data released by the United States government showed that the average net worth of an American household dropped slightly as stocks portfolio and home prices slipped in April-June 2011.

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The average net worth of American households slipped slightly as stocks and home prices continued to decline in the second quarter of this year, the United States government reported on Friday.

In a report, the US Federal Reserve said that the average wealth of an American household dropped by 0.3 percent to $58.5 trillion in April to June 2011 – the first decline after three consecutive quarterly increases.

The Federal Reserve, also known as the US Central Bank, attributed the decline in wealth to the lower value of stock portfolios and home values, which slipped 0.5 percent and 0.4 percent, respectively.

Meanwhile, the government said that liquid capital of corporations increased by 4.5 percent at the end of the quarter, accounting to about $2 trillion dollars. The stranglehold of cash by these companies results to lower spending and distribution of cash during the period.

The average net worth of an American home is one of the key economic indicators being monitored by the government, as well as economist, as it provides a clear picture on how people spend their money.

“When people feel they are poorer, they spend less. In turn, business will try to respond by cutting back on expansion plans and hiring, which is a typical cycle of an economy,” an analyst said.

He also said that American net worth is expected to fall further in the third quarter of 2011 after stocks plummeted at the start of July.